the new corporate garage

8/12/2019 The New Corporate Garage

http://slidepdf.com/reader/full/the-new-corporate-garage 1/9

scott D. Anthony Is themanaging director oflnnosight Asia-Pacific and

the author ofThe Little

Black Booko II IOIIQtion

Harvard Business Review

Press 2012 .

p a r a ~ p n s b t i f t i i n g a t t i e : i l l ~ e n t decades. There's

Apple. The popular perception is that

produce game-changing inventions. We look to hungry

entrepreneurs-the Gateses, Zuckerbergs, Pages, andBrins -inst ead. The rise of fast, nimble, and passionate

venture-capital-backed entrepreneurs seem s to have

made slow-paced big-company innovation obsolete, or

at least to have consigned it to the world of incremental

advances. But Apple's inventiveness is no anomaly; it indi-

cates a dramatic shift in the world of innovation. The revolu-

tion spurred by venture capitalists decades ago has created the

conditions in which scale enables big companies to stop shack-

ling innovation and star t unleashing it.

HBR. R

September 2 12 Harvard Business Review 5

http://localhost/var/www/apps/conversion/tmp/scratch_8/



THE BIG IDEA THE NEW CORPORATE GARAGE

Three trends are behind this shift. First, the in-

creasing ease and decreasing cost of innovation

mean that start-ups now face the same short-term

pressures that have constrained innovation at large

companies; as soon as a young company gets a whiff

of success, it has to race against dozens of copycats.

Second, large companies, taking a page from start-

up strategy, are embracing open innovation and less

hierarchical management and are integrating entre-

preneurial behaviors with their existing capabili-

ties. And third, although innovation has historically

been product- and service-oriented, it increasingly

involves creating business models that tap big com-

panies' unique strengths.

It's early days still, but the evidence is compellingthat we are entering a new era of innovation, in

which entrepreneurial individuals, or catalysts;'

within big companies are using those companies'

resources, scale, and growing agility to develop

solutions to global challenges in ways that few

others can. As the stories that follow show, these

companies have pushed into territory that was

once the province of entrepreneurs, NGOs, and

governments-from delivering health care technol-

ogy, clean water, and new agricultural capabilities

in developing countries to managing energy, traffic,

public transit, and crime in the world's major cities.Before looking at how catalysts drive such invention

inside their companies, it's important to appreciate

the three historical periods that brought us to the

present age-the fourth era ofinnovation.

A Brief History of InnovationThe first era of innovation-th at of the lone inven-

tor-encompassed much of human history. Innova-

tors occasionally formed or latched on to companies

to exploit the full potential of their ideas, but most

seminal innovations developed before about 191S

are closely associated with the individuals behindthem: Gutenberg's press. Whitney's cotton gin. Edi-

son's lightbulb. The Wright brothers' plane. Ford's

assembly line (actually as much a business model as

a technology).

With the perfection of the assembly line, a cen-

tury ago, the increasing complexity and cost of in -

novation pushed it out of ndividuals' reach, driving

more company-led efforts. A combination of

longer-term perspectives and less stifling cor- (

porate bureaucracies meant that many orga- •f

nizations would happily tolerate experimen- t. Jtal efforts. Thus the heroes of his second era

A46 Harvard Business Review September 2 12

worked in corporate labs, and corporations evolved

from innovation exploiters into innovation creators.

Many of the notable commercial inventions of the

nex t 60 years came from these labs: DuPont's mira-

cle molecules (including nylon); Procter & Gamble's

Crest, Pampers, and Tide brands; the U-2 spy plane

and SR-71 Blackbird fighter jet from Lockheed Mar-

tin's famed Skunk Works.

The seeds of the third era were planted in the

late 19SOs and the 1960s, as companies started to

become too big and bureaucratic to handle at-the-

fringes exploration. The restless individualism of

baby boomers clashed with increasingly hierarchi-

cal organizations. Innovators began to leave compa-

nies, band with like-minded rebels;' and form newcompanies. Given the scale required to innovate,

however, these rebels needed new forms of funding.

Hence the emergence of he VC-backed start-up. The

first publicly owned venture capital organization

was General Georges Doriot's American Research

and Development Corporation, whose $70,000 in-

vestment in Digital Equipment Corporation in 19S7

was worth $3SS million when DEC went public in

1968. The third era came into its own in the 1970s,

with the establishment of Kleiner Perkins Caufield

& Byers and Sequoia Capital. These and similar in-

stitutions helped to support t he formation of Apple,Microsoft, Cisco Systems, Amazon, Face book, and

Google. Life became even harder for innovators in

big companies as the capital markets' expectations

for short- term performance grew.

The technologies birthed during this era and the

globalizationof world markets have dramatically ac-

celerated the pace of change. Over the past so years

corporate life spans by some measures have de-

creased by dose to SO%. Back in 2000, Microsoft was

an unstoppable monopoly, Apple was playing at the

fringes of the computer market, Face book founder

Mark Zuckerberg was a student at Phillips ExeterAcademy, and Google was a technology in search of

a business model.

This breathless pace, and the conditions and

tools that enable it, bring us to the fourth era-when

corporate catalysts can have a transformational im-

pact. Whereas the inventions that characterized the

first three eras were typically (but not always) tech-

nological breakthroughs, fourth-era innova-

0 tions are likely to involve business models.

? One analysis shows that from 1997 to 2007

more than half of the companies that

made it onto the ortune soo before their




I

HBR.ORG

Idea in Brief

This is innovation's fourth

era, when the scale of a

big company can unleash

innovation rather than

shackle it.

Key to this shift is the emer-

gence of passionate, entre-

preneurial catalysts who use

corporations' global infrastruc-

ture, brand reputation, partner

relationships, process excel-

lence, and other capabilities

provides pacemakers and asso-

ciated financing to rural Indians;

Unilever's Pureit, a portable,

affordable water purifica-

services to help cities manage

energy, water, public transit,

and other resources.

to develop solutions to global

tion technology for household

use in developing countries;

Syngenta's Uwezo initiative,

which scales crop-protection

To encourage catalysts,

companies must embrace

open and systematic innova-

tion, simplify and decentralize

decision making, be learning-

challenges in ways that few systems for use by smallholders focused and failure-tolerant,

others can. in Africa; and IBM s Smarter Cit- and, above all, make innovation

Examples include Medtronic's ies, which bundles technologi- purpose-driven.

Healthy Heart for All, which cal infrastructure and related

25th birthdays-including Amazon, Starbucks, and

AutoNation-were business model innovators.

Today it's easier than ever to innovate, which

may suggest that it's an ideal time to start a business.After all, a wealth oflow- or no-cost online tools, cou-

with shortening development cycles, makes it harder

than ever for start-ups to create enduring competi-

tive advantage. In other words, they are increasingly

vulnerable to the same capital-market pressures thatplague big companies-but before they've developed

pled with hyperconnected markets, put innovation lasting corporate assets.

capabilities into the hands of the masses and allow

ideas to rapidly spread. For many start-ups, $2s,ooo Medtronic s Healthy Heart

is sufficient to launch a fully formed business , as the

incubatorY Combinator and its numerous copycats

show.These early-stage funders have helped launch

promising new companies such as Dropbox, Airbnb,

Xobni, Scribd, Hipmunk, and many more.

But surprisingly, the ease and pace of innovation

that now aid entrepreneurs can also work against

them. In the past, although growth markets attractedmultiple entrants (by one count, Google was the 18th

significant contender in the search-engine space),

competition was less frenzied , giving start-ups

time-often years-to develop difficult-to-replicate

assets. And companies that clearly weren't going to

make it promptly folded, releasing top talent into the

market.Today young companies have what feels like

milliseconds to enjoy an early success before they

need to sta rt outspending imitators and fighting for

talent. Consider the daily deal space. By some ac-

counts, Groupon reached $1 billion in revenue faster

than any other company in history. But dozens ofinstant copycats put it on the defensive-and lower

fixed costs today mean those contenders can linger

far longer. Groupon may succeed in spending its chal-

lengers into retreat, but hypercompetition, coupled

In contrast to this fearsome position, consider the

enabling environment Medtronic encountered in

an innovative effort called Healthy Heart for All.

Medtronic is as far from a start-up as one can imag-

ine: Founded in the late 1940s, it is today the world's

largest stand-alone medical device manufacturer,

with $16 billion in revenue, and is best known for

its implantable pacemakers and defibrillators. TheHealthy Heart program seeks to bring pacemaker

technology to hundreds of thousands of Indians

who desperately need it.

In late 2010 I visited The Mission Hospital (TMH)

in Durgapur, a modest town by Indian standards

(population about 1 million), nestled in India's

northeast corner, near Bangladesh. During my visit

I saw a pilot of Medtronic's innovative business

model in action. The company had drawn on pio-

neering Indian health care models, such as Aravind

Eye Care System's affordable cataract care, to help

TMH design new ways to serve low-income patients.Heart disease is prevalent in India but diagnosis

is not, so Medtronic created diagnostic camps to

identify potentia l patients. I saw one camp in a ru-

ral village where technicians used low-cost electro-

he increasingease and decreasing cost of innovationmean that as soon as a I} Oung company gets a whiffofsuccess, it has to race against dozens of copycats

September 2012 Harvard Business Review 47





WHAT GIVES BIG

COMPANIES AN

ADVANTAGE?

Giants like Medtronic, Uni-

lever, Syngenta, and IBM

have advantages that start-

ups would find hard to

replicate. They include:

Global infrastructureWhereas int ernet-based

offerings are easy to dis-

tribute, physical products

and face-t o-face services

require infrastructure

(particularly last mile

distribution channels) . Big

companies use theirs to

establish footholds and

expand distribution quickly.

Strong brandreputationThe gatekeepers between

an idea and an end user-in

Medtronic's case, hospital

purchasing agents, gov-

ernment regulators, and

influential doctors-often

feel hesitant about products

and services offered by new

companies. A strong brand

helps a large company sail

past those gatekeepers.

Partner relationshipsLarge compan ies can easily

acquire best-of-breed part-

ners to support an idea.

Scientific knowledgeDedicated teams of experts

inside corporations produce

difficult-to-replicate knowl-

edge that is often protected

by patents.

xperience

with regulatorsIncreased government

intervention in markets

presents roadblocks to

start-ups that haven't had

to deal with officials in a

number of sectors.

Process excellenceAs their operations grow,

start-ups hit predictable

speed bumps that big com-

panies can avoid.

cardiogram machines to screen dozens of people

in an afternoon and wirelessly send their ECGs to

be read by doctors hundreds of miles away. Insur-

ance is still rare in India, so Medtronic had to make

its pacemaker more affordable. It worked with a lo-

cal partner to c reate India's first financing plan for

medical devices.

No new technology was involved here-and

that's the point. Medtronic used business model in-

novation to enter markets formerly out of ts reach. It

follows in the footsteps ofVodafone (M-Pesa mobile

payment service in Africa), Dow Corning (Xiameter

online channel), and Hilti (tool fleet management

services) as a market leader using a new model to

power growth.Healthy Heart's first implant occurred in Sep-

tember 2010. Over the subsequent 18 months, pilot

programs in a handful of hospitals screened thou-

sands of patients who previously would not have

been diagnosed, let alone treated, and provided vi-

tal in-market learning. Though the total number of

implants is still relatively smal l-approximate ly soto date-the pilots have demonstrated the model's

promise. On the basis of this early success, the com-

pany plans to scale up the program across India and

then in other emerging markets. The effort also po-

sitions Medtronic to dramatically expand in thosemarkets as it develops new technologies that lower

costs. (CEO Omar Ishrak has announced a goal of

radically reducing the cost of a simple pacemaker.)

Think about the challenges that would face a

start-up seeking to compete with Medtronic. It could

mimic pieces ofMedtronic's approach, such as the

diagnostic camps and a financing plan. But it would

have to either build a new pacemaker and seek

regulatory approval (which would take years, if not

decades) or partner with an established pacemaker

manufacturer. I t would struggle to get meetings

with local doctors with whom Medtronic already hasdeep relationships. And, of course, it would have to

learn how to operate in India, a notoriously complex

market. Medtronic simply has capabilities, experi-

ence, relationships, expertise, and resources that

entrepreneurs don't.

This is a fourth-era-innovation story. Medtronic

mixed the entrepreneurial approach of a third-era

VC-backed start-up with the unique capabilities

once housed in second-era corporate labs. It's easy

to bemoan the stifling bureaucracies that character-

ize some large companies. But giants like Medtronic

have hard-to-replicate advantages over start-ups.

48 Harvard Business Review September 2 12

(See the sidebar What Gives Big Companies an

Advantage? )

Once you recognize the fourth-era pattern , you

see examples everywhere. Imagine going back to

2007 and asking your friends to guess who would

become the leader in the exploding e-reader market.

Chances are they wouldn 't guess Amazon (Kindle)

or Barnes & Noble (Nook), because neither com-

pany had device expertise. But both had unique

distribution channels. The ready access to outside

innovation that now enables entrepreneurs likewise

allowed these big companies to develop devices in

less than 24 months. The resulting business has been

a boon for both ofthem. Google Android, Cisco Tele-

Presence, Nestle Nespresso, Tide Dry Cleaners,Microsoft Kinect, and many others fit this pattern.

The Role of the Corporate CatalystAs companies have decentralized strategic and in-

novation activities, promoting agility, they have

become increasingly hospitable to catalysts-th ose

mission-driven leaders who corral corporate re-

sources that are outside their traditional span of con-

trol to address sprawling challenges. They form net-

works or coalitions within and outside the company

and are motivated by the desire to solve big-often

global-problems.Healthy Heart, for example, could not exist with-

out the Medtronic catalyst Keyne Monson. In 2008

the head of the company's international arm asked

Monson to devise a business model that would

increase its presence in India. Monson launched

the effort without a single direct report. He found

advocates with in Medtronic's Indian organization

and worked with external enablers including Da-

vid Green, of Ashoka (which backs social entrepre-

neurs), to develop a case for broader investment. He

drew in outside partne rs early in the process, and

he engaged leadership by highlighting stories aboutindividual patients whom Medtronic could help.

(Mission-driven by nature, Monson was inspired

by his work in India to set up a separate nonprofit

company called Elevita, through which developed-

economy consumers can buy goods made by de-

veloping-country artisans.) Monson's early efforts

earned him the support ofregionalleaders-notably

Milind Shah, Medtronic's India country head, and

Shamik Dasgupta, the regional head ofMedtronic's

pacemaker and defibrillator business, both of whom

played critical roles in designing, staffing, and ex-

ecuting the pilot and expanding the program.




HBR.ORG

FOUR INNOVATION CATALYSTS

KEYNE MONSON YURI JAIN

MEDTRONIC UN LEVER

Healthy Heart for Pureit, a portable wa-

All provides cardiac ter purification system,

diagnostic services provides safe water at

and financing to bring half a cent per liter.

pacemakers to peopleMillions of units have

who previously couldbeen sold throughout

not access them.India . The goal is to

Thousands have been provide clean water to

screened in pilots and soo million people.dozens ofpacemakers

have been implanted.

Plans involve scaling up

across India and other

emerging markets.

Medtronic 's effort, like those of many other

fourth-era innovators, illustrates how big compa-

nies are powerfully and uniquely suited to tackling

large-scale social problems such as hunger, healthcare, sustainability, and education. These aren' t

stand-alone corporate social responsibility efforts-

they are strategic initiatives to create profitable busi-

nesses that improve the world.

Unilever s Water PurificationUnilever, which has operations in more than 100

countries and sales in 190, has increasingly in-

tertwined its social and corporate goals. In 2010

it launched the Unilever Sustainable Living Plan,

which aims to halve the greenhouse gas impact of

the company's products, source 10 0% ofagriculturalraw materials sustainably, and help more than a bil-

lion people improve thei r health and well-being.

One effort that supports this plan is the Pureit

water filtration business, overseen by Yuri Jain, a

vice president who leads the company's global wa-

ter initiatives. People in most parts of the world-

especially developing countries- lack reliable access

to safe drinking water. Studies show that low-cost

interventions to purify water can have a big impact,

reducing the risk of potentially lethal diarrheal dis-

eases by SO%. However, many consumers in, for in-

stance, Bangladesh and India have no choice but to

NICK MUSYOKA COLIN HARRISON

SYNGENTA IBM

Uwezo crop-protection Smarter Cities bundles

chemicals and seeds use technology and related

the sachet distribution services to help cities

model plus supportive efficiently manage

education and training energy, water, traffic,

to drive adoption by parking, public transit ,

smallholders. and crime.

Sales in Kenya are fore A Stockholm project

cast at 6.5 million for reduced carbon emis-

2012. Plans are under sions by 17% and traffic

way to expand to other delays by 50%. Projects

countries in Africa and have been completed

Asia. in at least seven other

cities.

boil water to purify it, which is expensive, takes time,

leaves the water vulnerable to recontamination, and

consumes precious fossil fuels.

Jain traces his involvement in the Pureit projectback to the creation of the first PowerPoint slide

on the business more than a decade ago. Having

lived in India, we all know that drinking water is a

problem;' he recalls. As we looked around, govern-

ments had tried, and NGOs had tried, but no one had

figured out a scalable solution:' So Jain and a small

team set out to find one. Things looked grim a few

years into the project, when the team found an ap-

proach that would work-but at a prohibitive cost.

Rather than pursue a lower -quality, cheaper solution,

the team and other stakeholders pushed to both re-

tain quality and lower cost. Ultimately, a group of100 Unilever scientists around the globe cracked the

problem. I think only a corporation could pull this

off;' Jain says.

Pure t combines a dirt-removing mesh, a carbon

filter, a processor that kills germs, and a polisher

that removes residuals. It produces safe water at a

cost of just half a cent per liter. Pure t doesn't need

electric power (an importan t feature given the fre-

quency of power outages in emerging markets) or

running tap water. It's portable and can easily fit

in small kitchens, and it switches off automatically

when the replaceable processor is depleted, prevent-

September 2 12 Harvard Business Review 49





ing consumers from using unsterilized water. Hin-

dustan Unilever launched Pureit in Chennai in 2004,

leveraging its supply chain expertise and retailer re-

lationships to distribute the product throughout the

country.

Like Monson at Medtronic, Jain enlisted anum-

ber of external parties to help bring the company 's

innovation to market-in this case by partnering

with NGOs to make Pureit available to schools and

consumers who would have difficulty affording the

technology. It really helps when you are a team of

a few people with the disproportionately large mis-

sion of protecting 500 million lives ;' he says. In

this context, when you start from a blank slate and

ask 'What is the best way to do it?' you are open tothe idea that you have to partner and create an eco-

system:' Unilever also works closely with the Inte-

grated Village Development Project, which helps

women access small loans supporting the purchase

of productivity tools and hygiene products such as

Pureit.

By early 2012 Unilever had sold millions of units.

It estimates tha t 35million people are drinking Pureit

filtered water-a number the company hopes will

increase well more than 10-fold by 2020, creating a

multibillion-dollar business.

Syngenta s Productive Farming

In the 1980s the sachet packaging model, which pro-

vides affordable single doses of a product such as

shampoo to poor consumers, was adopted by a few

mass marketers (including Unilever). That model

later inspired a catalyst at the agribusiness giant

Syngenta to develop an innovative way of tackling

hunger.

Formed in 2000 through a merger between No-

vartis Agribusiness and Zeneca Agrochemicals, Syn-

genta has played a key role in boosting the world's

agricultural productivity. Although much of thatwork has focused on large farms, Syngenta recently

introduced a range of efforts aimed at smallhold-

ing farmers. Improving the productivity of the 500

million small farms across the world, the company

realized, could pay enormous humanitarian and

financial dividends. In Kenya alone, for example,

4 million smallholders grow more than 80% oflocal

produce. Many of hese farmers live hand- to-mouth.

The sheer numbers made this market an obvi-

ous target. In 2005 Syngenta lured Nick Musyoka

away from the British consumer goods giant Reck-

itt Benckiser, where he had worked on the Mortein

Doom pesticide, to lead a smallholding initiative.

The opportunity to attack such an enormous chal-

lenge motivated Musyoka to become a catalyst in an

unfamiliar industry.

Musyoka and his team devised a program

dubbed Uwezo ( capability in Swahili), which uses

the sachet distribution model to provide smallhold-ers with affordable, premeasured packages of crop-

protection chemicals-the same products sold to

large farms. Farmers could simply pour one packet

into 20 liters of water in the backpacks they used

to spray their fields, eliminating dosing problems

and waste.

Musyoka quickly recognized that lowering prices

was only part of he solution; education was needed,

too. He and his team launched a multipronged in-

formation campaign that leveraged existing retailer

relationships. Retailers serve as impor tant advisers

to farmers, so the team created a program to trainretailers about productive farming practices. In ad-

dition, it commissioned 45 field agents to travel on

motorcycles to farms, plant demonstration plots,

and advocate responsible farming. Mass-market

media-including programs that farmers could lis-

ten to on their mobile phones-broadened the pro-

gram's reach.

Like Monson, Musyoka drew inspiration from

outside his company's industry. He created a busi-

ness model that combined the capabilities of a large

company (agronomic knowledge, retailer relation-

ships,brand recognition) with external enablers anda stand-alone field force, and it is working. Syngenta

projects that sales ofUwezo packs in Kenya (which

is home to less than 1% of the world's smallholders)

will reach $6.5 million in 2012. The company plans

Fourth era innovations have huge growthpotential in both emerging and developed

markets.so Harvard Business Review September 2012




HBR.ORG

to expand the program to other African and Asian 2006 to 2011 its revenues increased by 65%-with

countries. It recently committed to building a $1 bil- new products contributing $700 million-and net

lion business-in which Uwezo and related pro- income more than doubled.

IBM s Smarter Cities

grams will play a significant part-in Mrica over the

next 10 years and will invest more than $500 million

to support it. This will involve recruiting and train-

ing about 700 agronomic specialists and developing

distribution networks, logistics, and local produc-

tion facilities.

More broadly, over the past five years Syngenta's

corporatewide focus on innovation has led to an ex-

plosion of offerings that have boosted land produc-

tivity and the personal productivity of farmers. From

Fourth-era innovations in emerging markets have

huge growth potential, as the Medtronic, Unilever,

and Syngenta initiatives show. But fourth-era ap-

proaches apply equally in developed markets. In

2006 the IBM master inventor and catalyst Colin

Harrison took part in InnovationJam, two 72-hour

crowdsourcing sessions that involved 150,000 em-

ployees, family members, business partners, and

IBM THROUGH THE FOUR ERAS

FIRST ERA

LONE

INVENTORS

The company traces its roots

back to the 188os, when

several men, working individu-

ally, patented breakthrough

tabulating machines and time-punch clocks for business ap-

plications. The inventions were

combined into one organiza-

tion that became International

Business Machines.

SECOND ERA

CORPORATE

LABS

After World War II the company

moved to systematize innova-

tion by opening its legendary

Watson Research Center. Pio-

neering not only computing butalso basic research in telecom-

munications, physics, mathe-

matics, and economics, Watson

and other I M labs around the

globe spawned hundreds of

new products (including the

world-changing System 360),

five Nobel Prizes, and-for 17

years in a row-more patents

than were earned by any other

company in the world.

THIRD ERA

VC-BACKED

START-UPS

But I M was disrupted in the

third era, when the proto-

typical VC-backed start-ups

Intel and Microsoft became

partners in itsI M

PC initiative.Within a decade each start-up

had achieved a market value

surpassing IBM's own, while

Big Blue fell into a state of dis-

repair and became the subject

of breakup rumors.

FOURTH ERA

CORPORATE

CATALYSTS

Lou Gerstner took the helm in

1993 and st arted transforming

the company from a hardware

manufacturer into a provider

of software and solution ser-vices. Over the pas t decade

Sam Palmisano has acceler-

ated the transformation, turn-

ing IBM's size from an anchor

slowing innovation into an

engine that corporate catalysts

can use to accelerate it.






Daniel Pink argues th t creative people are motivatedby autonomy, opportunities to develop mastery, and asense of purpose That pplies in sp des to catalysts

clients. Together they engaged in an online brain-

storming exercise to conceive the next generation of

growth businesses for IBM .

IBM commi tted $100 million to 10 small-scale

experiments that emerged from the jam in areas in-

eluding water, energy, transporta tion systems, and

health care. Harrison was selected to help simulatea venture environment on a new corporate strategy

team located at company headquarters in Armonk,

New York . The team presented its ideas directly to

CEO Sam Palmisano.

IBM has a vast array of resources, from R&D to

sales and marketing, that no VC-backed start-up

could even dream of. But like many multinationals,

the company struggled to marshal them during in-

novation's third era. (See the sidebar IBM Through

the Four Eras:') Harrison and fellow catalysts within

the company helped to change this.

Like Monson, Jain, and Musyoka, Harrison acti-vated resources beyond his traditional realm. We

started very small, he says. I work with several

hundred people, but no one reports to me. In a com-

pany of this size, if you are persistent enough, you

can find people with all kinds of skills:' Today the

democratization of innovation means that catalysts

can have a huge impact without deep budgets or le-

gions ofreports.

Harrison led one ofthe 10 prototype-development

experiments, originally called Instrumented Planet.

His team sought to answer this question: How could

IBM combine its services acumen; the connectiv-ity of the web; and physical sensors, actuators, and

RFID chips to improve efficiency by monitoring the

movement of people and vehicles and the activityof

energy systems? Many of he building blocks were in

place, but the company needed a unifying vision and

a specific service offering.

In classic catalyst style, Harrison looked outside

the organization for inspiration. In early 2008 he

was visiting Masdar City, an urban-planning project

in Abu Dhabi that seeks to create a carbon-neutral,

zero-waste city of the future. He recalls, I realized

that this was the idea we were missing-that every-

52 Harvard Business Review September 2 12

thing we wanted to do could coexist in one place-

and I suddenly had this view of an integrated opera-

tions center for a city:'

Thus Instrumented Planet became Smarter Cit-

ies (part of IBM's Smarter Planet initiative), through

which the company would offer a bundle of tech-

nological infrastructure and related services to

help cities save money and improve lives by bet-

ter managing energy, water, traffic, parking, public

transit, and other resources. Consider IBM's project

in Stockholm. The city planned to build a $1 billion

tunnel to help alleviate traffic congestion. In addi-

tion to being expensive, the tunnel's construction

would consume enormous amounts of ime and fuel

and would disrupt the city for years. IBM proposed

a different plan: monitor every car from an intel-

ligent operations center;' using sensors, and offer

financial incentives to drivers to take alternative

routes or public transportation when appropriate.The Smarter Cities plan was enac ted at a 10th of the

cost of he tunnel in a lOthof he time, and it reduced

greenhouse gas emissions by 17% and traffic delays

by more than SO% .

IBM went on to complete Smarter Cities projects

in Rio de Janeiro, Berlin, Beijing, Dublin, Singapore,

and New York. In Chicago its network enabled an-

other company to build an app that monitors all the

city's snowplows during a storm and tells drivers

which streets are clear at any moment. Smarter Cit-

ies showcases how a company catalyst can harness

innovation tools to solve big problems while simul-taneously accelerating revenue and profit growth.

(Smarter Planet as a whole is well on its way to con-

tributing $10 billion in revenues by 2015.)

Are You Ready?

In an earlier era, Monson, Jain, Musyoka, and Harri-

son might have done their work in a not-for-profit or

a VC-backed start-up. Indeed, they empathize with

the stereotypical garage-based entrepreneur. Their

garage just happens to be stocked with amazing tools.

Unfortunately, not all corporate environments

are conducive to fou rth-era innovation. For cata-




lysts to flourish, companies need to embrace open

innovation, approach innovation systematically,

simplify and decentralize decision-making mecha-

nisms, and be learning-focused and failure-tolerant.

Beyond that, they need to make the pursuit of

transformative innovation a purpose-driven ac-

tivity. Many corporate leaders fret about how to

provide sufficient economic incentives to attract

high-quality innovators. It is hard for them to offer

the potential for wealth that a stand-alone entre-

preneur might realize. But, as Daniel Pink discusses

in his 2009 book Drive additional financial incen-

tives can actually decrease performance on creative

tasks. Pink argues that the way to motivate creative

people is to give them autonomy, provide oppor-tunities to develop mastery, and instill a sense of

purpose in their work. That applies in spades to

catalysts.

The fourth era is already shifting the roles that in-

novation players have traditionally held and creating

new ones:

Venture capitalists who were the enablers of the

third era, must consider how their model has to

change if hey are to remain relevant.

Young innovators set on improving the world

should recognize that working for a large company

isn't selling out -it can maximize their impact.

Corporate leaders must critically examine the

degree to which their companies' environments are

hospitable to the work of catalysts.

Employees who find their innovation environ-

ment inhospitable should consider whether another

company would provide more-fertile ground for

catalytic work.

Catalysts who have just started their efforts

should grit their teeth, because the work will not be

easy. Asked to give advice to fellow catalysts, Uni-

lever'sYuri Jain advises having purpose and persis-

tence. It is a daily struggle:' he says. If you don'tbelieve in the project, the barriers are going to be

enormous.

Entrepreneurs will continue to give birth to great

businesses, and nonprofits will continue striving

to build a better society. But the people changing

the world today are as likely to be in corporate cu-

bicles and conference rooms as in SiliconValley or at

social-impact conferences. Welcome to innovation's

new era. 0 HBR Reprint R1209B

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